Meaning of Word
The word “collateral” refers to something pledged as security for the repayment of a loan, to be forfeited in case of a default. It can also refer to something secondary or related but not directly the main object.
Definitions and Meaning in English
- Collateral (noun): Property or assets offered to secure a loan, to be used as repayment if the borrower defaults.
- Collateral (adjective): Related or secondary, but not directly the main focus or objective.
- Collateral damage (noun): Unintended damage, injury, or death caused by an action, especially in a military context.
History and Origin
The word “collateral” comes from the Latin collateralis, which means “on the side,” from com- (together) and latus (side). The term was first used in English in the 16th century, primarily in the context of finance and security, before it expanded to include secondary or related meanings.
Detailed Explanation
Collateral is most commonly used in financial contexts, where it refers to an asset that a borrower offers to a lender to secure a loan. If the borrower fails to repay the loan, the lender has the legal right to take the collateral as compensation. For example, a house might serve as collateral for a mortgage loan.
In a broader sense, collateral can also describe anything secondary or related, not directly essential but still associated with the main objective. This meaning is often used in contexts such as collateral benefits, collateral damage, or collateral events.
Example Sentences
- The bank required collateral before approving the personal loan.
- His car was used as collateral to secure the loan.
- The company offered its office building as collateral for the business loan.
- The lender could seize the collateral if the borrower defaults on the loan.
- There was collateral damage in the bombing, affecting nearby buildings.
- She used her jewelry as collateral for the pawn shop loan.
- The collateral effects of the decision were not fully considered.
- If the borrower fails to repay, the bank may take the collateral.
- The collateral benefits of the new policy will be evident in the long term.
Synonyms with Short Explanation
- Security: Something that ensures the repayment of a loan or obligation.
- Guarantee: An assurance or pledge to support or back up a loan.
- Pledge: A formal promise or guarantee, especially related to securing debt.
- Surety: A person or thing that guarantees the fulfillment of an obligation.
- Asset: An item of value used as a security or collateral in transactions.
Related Words with Short Explanation
- Loan: A sum of money that is borrowed and expected to be paid back with interest.
- Mortgage: A loan specifically for purchasing property, often secured by the property itself.
- Default: The failure to repay a loan according to the terms agreed upon.
- Lender: A person or institution that lends money to others.
- Borrower: A person or entity that borrows money or assets.
Antonyms
- Unsecured: Not protected by collateral, where a loan has no asset tied to it.
- Free: Not bound by a pledge or collateral, in the sense of not being tied to any conditions.
- Independent: Not reliant on secondary or collateral support.
- Primary: Directly related or central, as opposed to collateral (secondary).
- Unrelated: Not connected or associated with the main issue, opposite of collateral in some contexts.